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The Product-Mix Auction: A New Auction Design for Differentiated Goods

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  • Klemperer, Paul

Abstract

Klemperer describes a new static (sealed-bid) auction for differentiated goods—the “Product-Mix Auction”. Bidders bid on multiple assets simultaneously, and bidtakers choose supply functions across assets. The auction yields greater efficiency, revenue, information, and trade than running multiple separate auctions. It is also often simpler to use and understand, and less vulnerable to collusion, than a simultaneous multiple round auction. Klemperer designed it after the 2007 Northern Rock bank-run to help the Bank of England fight the credit crunch; in 2008 the U.S. Treasury planned using a related design to buy “toxic assets”; it may be used to purchase electricity.

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Bibliographic Info

Paper provided by Regulation2point0 in its series Working paper with number 591.

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Date of creation: Jan 2009
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Handle: RePEc:reg:wpaper:591

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  1. Poole, William, 1970. "Optimal Choice of Monetary Policy Instruments in a Simple Stochastic Macro Model," The Quarterly Journal of Economics, MIT Press, vol. 84(2), pages 197-216, May.
  2. Milgrom,Paul, 2004. "Putting Auction Theory to Work," Cambridge Books, Cambridge University Press, number 9780521536721, October.
  3. Lawrence M. Ausubel & Peter Cramton & Emel Filiz-Ozbay & Nathaniel Higgins & Erkut Ozbay & Andrew Stocking, 2009. "Common-Value Auctions with Liquidity Needs: An Experimental Test of a Troubled Assets Reverse Auction," Papers of Peter Cramton 09cvawln, University of Maryland, Department of Economics - Peter Cramton, revised 2012.
  4. Lawrence M. Ausubel & Peter Cramton, 2008. "A Troubled Asset Reverse Auction," Papers of Peter Cramton 08tara, University of Maryland, Department of Economics - Peter Cramton, revised 2008.
  5. Paul Klemperer, 2004. "Auctions: Theory and Practice," Economics Series Working Papers 2004-W09, University of Oxford, Department of Economics.
  6. Gul, Faruk & Stacchetti, Ennio, 1999. "Walrasian Equilibrium with Gross Substitutes," Journal of Economic Theory, Elsevier, vol. 87(1), pages 95-124, July.
  7. Weitzman, Martin L, 1974. "Prices vs. Quantities," Review of Economic Studies, Wiley Blackwell, vol. 41(4), pages 477-91, October.
  8. Paul Klemperer & Margaret Meyer, 1986. "Price Competition vs. Quantity Competition: The Role of Uncertainty," RAND Journal of Economics, The RAND Corporation, vol. 17(4), pages 618-638, Winter.
  9. Ilan Kremer, 2004. "Underpricing and Market Power in Uniform Price Auctions," Review of Financial Studies, Society for Financial Studies, vol. 17(3), pages 849-877.
  10. Kelso, Alexander S, Jr & Crawford, Vincent P, 1982. "Job Matching, Coalition Formation, and Gross Substitutes," Econometrica, Econometric Society, vol. 50(6), pages 1483-1504, November.
  11. Klemperer, Paul D & Meyer, Margaret A, 1989. "Supply Function Equilibria in Oligopoly under Uncertainty," Econometrica, Econometric Society, vol. 57(6), pages 1243-77, November.
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Cited by:
  1. Paul Klemperer & Aytek Erdil, 2009. "A New Payment Rule for Core-Selecting Package Auctions," Economics Series Working Papers 2009-W11, University of Oxford, Department of Economics.
  2. Xavier Vives, 2011. "Strategic Supply Function Competition With Private Information," Econometrica, Econometric Society, vol. 79(6), pages 1919-1966, November.
  3. Thomas Greve & Michael G. Pollitt, 2013. "Determining the optimal length of regulatory guarantee: A Length-of-Contract Auction," Cambridge Working Papers in Economics 1348, Faculty of Economics, University of Cambridge.

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